FOX Enterprise host Marcus Lemonis discusses billionaires fleeing California to keep away from a proposed wealth tax on ‘The Backside Line.’
A proposed tax concentrating on California’s wealthiest residents is drawing robust help from seemingly voters, however critics warn it will discourage funding and set off an exodus of high-income earners and companies from the state.
“I feel it is a actually economically disastrous thought,” Adam Michel, director of tax coverage research on the Cato Institute, instructed Fox Information Digital. “It’s each diagnosing the issue incorrectly and likewise will not repair the issue that’s being identified.”
The “2026 California Billionaire Tax Act” would impose a one-time tax equal to five% on the web price on people making above $1 billion, in line with California’s Legislative Analyst’s Workplace (LAO). Lined property would come with companies, securities, artwork, collectibles and mental property.
The measure wouldn’t depend actual property somebody owns in their very own title (or by a revocable belief), however actual property held by an organization they personal might nonetheless issue into the tax as a result of it could possibly elevate the worth of that enterprise.
TAX FIGHT PUTS CALIFORNIA ON COLLISION COURSE AS BILLIONAIRES LEAVE FOR RED STATES
An activist holds an indication throughout a “Rally to Say No to Tax Breaks for Billionaires and Companies” on the Higher Senate Park on Capitol Hill on April 10, 2025, in Washington, D.C. (Alex Wong/Getty Pictures / Getty Pictures)
Supporters — together with SEIU-United Healthcare Employees West (SEIU-UHW) — say the measure is an emergency response to save lots of the state’s healthcare system from “collapse” as a result of potential federal cuts.
In line with the LAO evaluation, “90 p.c of the cash must be spent on well being care providers for the general public” whereas the rest would go towards administrative prices, schooling and meals help.
Nonetheless, Michel says that wealth taxes don’t work in follow, arguing they weaken incentives to construct companies, create difficult administrative complications and have generated disappointing income in international locations which have tried them.
He additionally says they relaxation on a flawed “fastened pie” view of the financial system that assumes wealth can merely be redistributed by taxation, however if truth be told leads to slower progress and a worse consequence for everybody.
Michel says a 5% wealth tax would siphon cash from companies, leaving homeowners with much less to reinvest, develop, and rent. (iStock / iStock)
Michel additionally stated a wealth tax differs from an revenue tax as a result of it’s assessed on accrued property somewhat than annual earnings and may translate to a a lot larger burden on enterprise homeowners.
If a enterprise earns something lower than a 5% return, each single greenback of revenue is taxed, he defined, translating into an income-tax fee at or above 100%, leaving no incentive for an entrepreneur to develop and preserve that asset.
Michel famous the proposal has even drawn opposition from Gov. Gavin Newsom.
“He is very conscious of the truth that this proposal will truly result in an exodus of the California tax base,” he stated.
CALIFORNIA IS BROKE, BUT IT’S NOT TOO LATE FOR THE REST OF US
California Governor Gavin Newsom has come out towards the 2026 Billionaire Tax Act. (Fred Greaves/Reuters / Reuters Images)
Michel cautioned the harm would not be restricted to the roughly 200 billionaires focused by the initiative. As a result of most wealth is held in “productive property” like inventory in corporations, actual property and equipment, he warned the tax would penalize the investments that drive the broader financial system.
“We’ll get much less housing, we’ll get much less funding in equipment and tools, we’ll get much less funding in new corporations,” Michel stated. “That finally makes everybody worse off.”
California already has essentially the most progressive tax system within the industrialized world, in line with the Fraser Institute.
Wealth taxes have been tried all over the world and failed, he identified, and only some OECD international locations nonetheless use them since their peak within the Nineties. In Spain, what was proposed as a brief one-time levy ultimately turned a everlasting tax on the rich. The identical factor might occur in California, he warned.
“States like California have an insatiable starvation for taking different folks’s cash,” he instructed Fox Information Digital. “And in the event that they’re profitable this time, there’s nothing stopping them from renewing this tax in future years.”
CALIFORNIA WILL REGRET BILLIONAIRE EXODUS, WASHINGTON POST WARNS
An individual holds a ‘Resist Billionaires’ signal as protesters display towards Tesla CEO Elon Musk’s Division of Authorities Effectivity (DOGE) initiatives throughout a nationwide “Tesla Takedown” rally outdoors a Tesla dealership on March 29, 2025, in Pas (Mario Tama/Getty Pictures)
Michel added that the risk alone of it returning would encourage high-income residents to depart the state.
The invoice’s sponsors on the SEIU-United Healthcare Employees West say it’s about making billionaires pay their “justifiable share.”
“California’s billionaires pay a lot decrease tax charges than what working households pay out of each paycheck. And shortly, huge federal healthcare funding cuts will collapse key components of the California healthcare system,” Suzanne Jimenez, chief of employees at SEIU-UHW, instructed Fox Information Digital.
She warned “native hospitals and emergency rooms will shut their doorways ceaselessly” except voters approve the Billionaire Tax so “billionaires pay their justifiable share” by a “one-time emergency 5% tax.”
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SEIU members protesting towards ICE on Friday, Jan. 23, 2026. (Hyoung Chang/The Denver Put up / Getty Pictures)
She rejected “sensationalized claims” from “a handful of billionaires and their highly-paid consultants” that there’s been an exodus from California earlier than the Jan. 1, 2026, residency deadline. Citing “an absence of public studies or confirmations,” she says it “doesn’t seem like true,” and that “the overwhelming majority” of roughly 200 billionaires “seem to have opted to stay.”
Jimenez stated nurses, healthcare employees, lecturers and firefighters “pay taxes on practically each greenback they earn,” and argues that with out the measure, “larger healthcare prices and better taxes can be shifted onto hundreds of thousands of Californians” already going through “skyrocketing healthcare and prescription prices.”
She known as the talk a “handy distraction” whereas her union’s “120,000 healthcare employees” keep targeted on maintaining hospitals and ERs open for “California’s 40 million residents.”
“Whereas these outlandish claims are a handy distraction for a small variety of billionaires, the 120,000 healthcare employees of our union stay targeted on maintaining California’s hospitals and ERs open for California’s 40 million residents who depend on them,” she added.
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Regardless that the proposal continues to be within the signature-gathering section to qualify for the November poll, it is drawn robust help from seemingly voters, in line with new polling. A February 2026 Nestpoint survey discovered 60% of seemingly voters again the wealth tax, whilst a majority of those self same respondents say the transfer would spark a enterprise exodus and value native jobs.
Fox Information’ Kristen Altus contributed to this report.
